An American Depositary Share (“ADS”) is a U.S. dollar denominated form of equity ownership in a non-U.S. company. ADSs are quoted and traded in U.S. dollars, and are settled according to procedures governing the U.S. market. It represents the foreign shares of the company held on deposit by a custodian bank in the company's home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate. ADSs can be exchanged or swapped for actual shares of the foreign stock they represent (the “underlying shares”). An American Depositary Receipt (“ADR”) is a negotiable instrument evidencing ownership in one or several ADSs. The terms ADR and ADS are often used interchangeably. The ADRs can be traded on a U.S. stock exchange. ADRs make it easier for Americans to invest in foreign companies, due to the widespread availability of dollar-denominated price information, lower transaction costs, and timely dividend distributions.
Currently, the method of performing swaps of ADRs with ordinary shares is a manual process involving phone calls between brokers and various counterparties to create a swap book and then manually identifying matches within the swap book. This matching role is often called an Informal Trading Market (“ITM”). Once a match is made and the trade is executed, the trade is then settled. A trade is an exchange of securities. The ITM process allows for trades continuously throughout the day. In a traditional ITM, if there is an imbalance between the swap requests, the traditional ITM is incapable of aggregating opposing requests to create a match.
Current ITMs are manual processes facilitated by bulk emails and telephone calls. Swaps occur after a phone call from an ITM representative, a broker, dealer, or trader, is received and a swap is negotiated. This process is manually intensive and limits the availability of swap opportunities to market participants. Presently, participants are contacted based on personal relationships, market knowledge, and the like.
As shown in FIG. 1, the front office 2 of a brokerage firm in the prior art uses a manual process as described above. The front office system 4 maintains a swap book, recording street swap requirements for both ADRs and underlying shares. Each broker negotiates the swap with counter parties effectively creating his or her own market. Oral confirmation of these trades usually takes place. Swap intents are matched and the trades are completed with the ITM broker acting as the counter party to both sides of the trade.
On the trade date, the trade is executed and processed by the mid-office (step 6). This is also when trade corrections are made. Two days after the trade date, trade confirmations are sent out to broker dealers, clearing firms and custodians. The matching process of confirmations versus known orders takes place at each institution and any discrepancies are corrected by manual clerical processes such as canceling and correcting the orders in the mid-office (step 6). Thereafter, books and records are updated at each firm. Three days after the trade date, clearance and settlement is performed 8a. 
In the prior art system, the broker dealers contact counterparties telephonically to help build a swap book that enables them to create matches between holders of ADRs and holders of underlying shares.
Certain basic information comes from the traders such as whether the order is a buy, a short, or a long sell, the quantity of shares, the description of the security to be transacted, customer account information, order type and price. A trade ticket is completed and this information is passed along to the mid-office. The trades that are executed are reported to the various exchanges, such as NASDAQ and the like, and given to the back office for settlement. Transactions are cleared through an organization such as National Security Clearing Corporation (“NSCC”), Depository Trust Company (“DTC”), and local custodians which are securities clearing organizations through which brokerages clear and settle securities transactions with one another. The respective custodians are then issued instructions to deliver the shares to their respective counterparties.
In the event of an error in the transaction, such as a simple entry error, corrections are made via a manual cancel and correct process. This process requires canceling the original order and entering a corrected order. Each party corrects the trade information and updates their respective systems. Correcting an error may be as simple as updating the order management system or may be as complex as requiring that other parties and systems be updated such as those involving the transfer agents, clearing houses, custodians and the like.
Among the methods known to perform electronic trading activities is one disclosed in U.S. Pat. No. 6,418,419 to Nieboer, et al. This patent describes a method in which trading occurs directly between participants. The method does not allow for an agent to act as a broker, the trading takes place between individual participants. A trading engine performs a matching process using an external pricing feed. The trading engine disclosed by Nieboer does not allow for aggregation of swaps or the execution of trading at specific times throughout the day.